Bankers draft how does it work

Experts recommend caution when accepting a bank draft as payment, particularly during times when financial institutions are typically closed, such as on a Friday night or a weekend. Payment that is offered for goods before the potential buyer has even seen them should also be suspect. A potential buyer who shows up with a bank draft in hand on a Sunday morning to buy a car from a private seller without even asking to test drive the car is probably up to no good.

Sellers should never accept a form of payment that seems questionable or that cannot be verified. It is possible to send a bank draft by mail to another country to transfer currency.

Policies on international drafts vary, so customers who want to transfer money this way should contact their bank directly with any questions.

The person requesting the draft usually makes the request in his or her local currency, which is converted to that of the payee when the draft is issued.

In many cases, an international bank draft must be deposited into a bank account and cannot be submitted for cash. Additional fees may be involved when international bank drafts are purchased and deposited.

One main advantage of using this form of payment is that it usually clears much more quickly than a personal check, often in the same amount of time it takes a local check to be cleared. Sending the draft by certified mail with a tracking number can help to ensure safe delivery.

Many companies now accept what are sometimes known as automatic bank drafts ABDs , in which money is taken out of the payer's account electronically at regular times. Also known as an automatic payment, automatic bill pay, and other terms, this type of draft differs in that no paper check is ever issued. This type of draft is most often used to pay for utilities, mortgage , insurance, and other important bills. All you need to do is bring both parts of the draft to your financial institution.

To make sure the document you have in your hands is the real deal, contact the financial institution that issued the draft. All in all, bank drafts are a handy payment method for making large purchases.

Of course, there are other secure forms of payment in use these days, such as Interac e-Transfers. Find a National Bank location near you. Interac e-Transfer is a registered trademark of Interac Corp. Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.

The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.

The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use. This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities.

The details of this service offering and the conditions herein are subject to change. The hyperlinks in this article may redirect to external websites not administered by National Bank. List of Partners vendors. The term bank draft refers to a negotiable instrument that can be used as payment just like a check. Unlike a check , though, a bank draft is guaranteed by the issuing bank. The total amount of the draft is drawn from the requesting payer's account—their bank account balance decreases by the money withdrawn from the account—and is usually held in a general ledger account until the draft is cashed by the payee.

Bank drafts provide the payee with a secure form of payment. Consumers have several avenues available when they need secure, certified payment options. They may require them to secure an apartment or for a deposit for a very large purchase.

Certified payment options give the payee security, knowing that the funds are available. These options include certified checks , wire transfers , and bank drafts. Bank drafts—also called banker's drafts, bank check, or teller's check—are just like cashier's checks. They are secure payment options that are guaranteed by the issuing bank—in many cases, for a large amount of money. When a customer requests a bank draft, the representative ensures they have enough money in their account to cover the amount requested.

Once verified, the bank withdraws the funds from the customer's account and transfers it to a general ledger or internal account. The bank prepares the draft with the payee's name and the amount. The draft has a serial number—which identifies the remitting customer—watermarks, and may even have micro-encoding—identifying it as a legitimate financial instrument that can be negotiated when presented by the payee to their bank.

Since the funds are already withdrawn from the requesting customer's account, the issuing bank ultimately becomes the payer. As mentioned above, bank drafts act as a viable and secure form of payment. They may be required by a seller when they have no relationship with a buyer, when a transaction involves a large sale price, or if the seller believes collecting payment may be difficult. For example, a seller may request a bank draft when selling a home or an automobile. Of course, a seller may not collect funds with a bank draft if the bank becomes insolvent and does not honor outstanding drafts, or if the draft is fraudulent.

Banking How to choose, use and manage bank accounts. Budgeting How to budget, find the best deals and switch to save money. Buying and running a car How to buy and finance a car, deal with problems with car finance, and cut running costs. Credit and purchases Credit basics, applying for credit, credit ratings and problems with credit. Insurance Insurance for cars, health, travel, and help with insurance.

Types of credit Store cards, credit cards, overdrafts, payday loans and illegal lending. Everyday money All Everyday money guidance. Tool Compare bank accounts. Budget Planner. Credit card calculator. Couch to Financial Fitness. Becoming a parent Having a baby, returning to work, childcare costs. Death and bereavement Wills, inheritance, sorting out estates.

Divorce and separation Sorting out money and homes, what if you have children, money after break ups. Illness and disability Managing costs, extra financial support, help with work or study. Long-term care Paying and getting funding, ways to pay, problems with care. Student and graduate money Credit cards, bank accounts, student debts. Talk money Difficult conversations, talking to teenagers, older people and partners. Calculator Divorce calculator. Baby costs calculator.

Buying a home Mortgages, help buying, remortgaging, first-time buyers, help and support. Renting Renting a home to live in, renting out a home, and overcoming problems. Homes All Homes guidance. Calculator Stamp Duty calculator. Mortgage affordability calculator. Mortgage calculator. Coronavirus Support with work, housing, loans and money. Dealing with debt Bills, court fines, help with debts. Money problems and complaints What to do about mis-selling, compensation and complaints.

Money troubles All Money troubles guidance. Tool Debt advice locator. Money Navigator. Auto enrolment Introduction, how it works, all about contributions. Building your retirement pot How much do you need, ways to build your pot, transferring and merging. Pension problems Complaints, financial help when retired, changes to schemes. Pensions basics Starting a pension, types of pension, understanding pensions.

State Pension How it works, what you might get, National Insurance. Taking your pension Ways to draw your pension, when can you retire, Pension Wise appointments. Tax and pensions Tax allowances, tax paid on pensions, tax relief. Appointment Book a Pension Wise appointment. Pension calculator. Workplace pension contribution calculator.

Find a retirement adviser. How to save Getting started, getting the most out of savings, problems. Investing How to invest, types of investing, buying and managing.